Correlation Between Invesco European and Champlain Small

Can any of the company-specific risk be diversified away by investing in both Invesco European and Champlain Small at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Invesco European and Champlain Small into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Invesco European Growth and Champlain Small, you can compare the effects of market volatilities on Invesco European and Champlain Small and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Invesco European with a short position of Champlain Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Invesco European and Champlain Small.

Diversification Opportunities for Invesco European and Champlain Small

-0.21

Correlation Coefficient

Invesco European  Champlain Small

Very good diversification

The 3 months correlation between Invesco and Champlain is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Invesco European Growth and Champlain Small in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champlain Small and Invesco European is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Invesco European Growth are associated (or correlated) with Champlain Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champlain Small has no effect on the direction of Invesco European i.e., Invesco European and Champlain Small go up and down completely randomly.

Pair Corralation between Invesco European and Champlain Small

Assuming the 90 days horizon Invesco European is expected to generate 2.62 times less return on investment than Champlain Small. But when comparing it to its historical volatility, Invesco European Growth is 1.26 times less risky than Champlain Small. It trades about 0.01 of its potential returns per unit of risk. Champlain Small is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,012  in Champlain Small on September 29, 2024 and sell it today you would earn a total of  260.00  from holding Champlain Small or generate 12.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Invesco European Growth  vs.  Champlain Small

Invesco European Growth

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco European Growth has generated negative risk-adjusted returns adding no value to fund investors. In spite of weak performance in the last few months, the Fund's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the fund investors.

Champlain Small

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Champlain Small has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Champlain Small is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Invesco European and Champlain Small

The main advantage of trading using opposite Invesco European and Champlain Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Invesco European position performs unexpectedly, Champlain Small can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Champlain Small will offset losses from the drop in Champlain Small's long position.

The idea behind Invesco European Growth and Champlain Small pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.